By Vincent Salandro | Builder
High mortgage rates, elevated construction costs, and falling consumer demand due to deteriorating affordability conditions have dragged down builder sentiment every month in 2022. Builder confidence in the market for newly built single-family homes posted its 12th consecutive monthly decline in December, dropping two points from November to 31, according to the NAHB/Wells Fargo Housing Market Index (HMI).
NAHB says the December reading is the lowest confidence reading since mid-2012, with the exception of the onset of the pandemic in spring 2020.
“In this high inflation, high mortgage rate environment, builders are struggling to keep housing affordable for home buyers,” says NAHB chairman Jerry Konter. “Our latest survey shows 62% of builders are using incentives to bolster sales, including providing mortgage rate buydowns, paying points for buyers, and offering price reductions.”
Konter says with construction costs up more than 30% since the beginning of the year, “there is little room for builders to cut prices.” Thirty-five percent of builders reduced home prices in December, slightly lower than 36% in November. The average price reduction was 8%, up from 5% or 6% earlier in the year.
